Net Asset Value(s)

8 January 2018

India Capital Growth Fund Limited (the "Company" or "ICGF")

Net Asset Value statement at 31 December 2017

Net Asset Value

The Company announces its Net Asset Value per share as at 31 December 2017 was 127.05 pence.

In December the Net Asset Value (NAV) was up 3.2% in Sterling terms, whilst the BSE Mid Cap TR Index was up 6.3%, delivering an under performance against the notional benchmark of 3.1%. In local currency terms, the NAV was up 2.3% for the month.

Portfolio update

Positive attribution to the portfolio's performance came from Ramkrishna Forgings (up 13.9%), Balkrishna Industries (up 11.3%), Ramco Cements (up 12.2%) and Manpasand Beverages (up 11.4%). Negative attribution came from Dewan Housing (down 5.5%), Indian Bank (down 4.1%) and Neuland Labs (down 7.9%).

Market and economic update

India's equity markets continued their upward momentum with BSE Sensex up 2.7% in December, whilst the BSE Mid Cap TR Index rose 5.4%, both driven principally by a good result for Modi's BJP party in Gujarat's state elections, winning comfortably albeit with a reduced majority. The slippage was most evident in rural voting patterns which is likely to influence future policy decisions somewhat ahead of next year's General Election. Foreign Institutions were net sellers (US$740m for the month) while Domestic Institutions were net buyers again (US$1.3bn for the month). INR appreciated 0.9% against USD and 0.8% against GBP.

Consumer price inflation rose to 4.9% in November (compared to 3.6% in October) on account of higher food and fuel prices. In a recent policy meeting the Reserve Bank of India left nominal rates unchanged at 6.3% maintaining a neutral stance, but acknowledged that inflation pressures have increased, and thus raised its own forecasts on inflation to 4.3% - 4.7% for the second half of the current fiscal. In tandem, the 10 year benchmark Government bond continued to fall, increasing yields for the fifth consecutive month to 7.3% amid concerns of accelerating inflation and fears of fiscal profligacy. Not only has the Government increased the size of its debt-selling program, thereby increasing the risk of fiscal slippage in FY18, but tax revenues are also likely to fall short given recent reductions in GST rates for multiple products. Q3 corporate earnings reports will begin in mid-January with a positive expectation in the main, as companies results are expected to benefit from the low base effect of last year, as a consequence of the demonetisation impact. The market awaits the Finance Minister's Budget for FY19 which will be delivered to Parliament in early February, fearing that politics may override policy, ahead of multiple State elections throughout 2018.